The Limits of Running IT Like a Business:

http://www.dominicbarrow.com/documents/Articles/The%20Limits%20of%20Running%20IT%20Like%20a%20Business.pdf

Chris Potts

The Limits of Running IT Like a Business:

http://www.dominicbarrow.com/documents/Articles/The%20Limits%20of%20Running%20IT%20Like%20a%20Business.pdf

Chris Potts

Most IT organizations face the risk of being sidetracked for an Cloud offering by a third party that can compete on costs. IT organizations need to focus on their strengths – the intimate business context they have, and position themselves as a strategic partner to the business. Operating as a business in their interactions with their business counterparts comes with a great deal of risks.

CIOs that operate their IT organizations like businesses, that track their costs based on business value delivered have an advantage. For instance, employing the concept of Activity Based Costing (ABC) to their costs, where IT costs are mapped to business activities, eg. IT cost per trade is $0.17 or IT cost per policy renewal is $0.50 (see http://blogs.hbr.org/sviokla/2009/07/it_costs_do_you_speak_their_la.html), allows CIOs better insight into the business value generated by IT. This can help CIOs focus on optimizing the allocation of resources to those activities that generate value, enabling IT to transition from being a cost center to becoming a value-driver.

Most IT organizations face the risk of being sidetracked for an Cloud offering by a third party that can compete on costs. IT organizations need to focus on their strengths – the intimate business context they have, and position themselves as a strategic partner to the business. Operating as a business in their interactions with their business counterparts comes with a great deal of risks.

CIOs that operate their IT organizations like businesses, that track their costs based on business value delivered have an advantage. For instance, employing the concept of Activity Based Costing (ABC) to their costs, where IT costs are mapped to business activities, eg. IT cost per trade is $0.17 or IT cost per policy renewal is $0.50 (see http://blogs.hbr.org/sviokla/2009/07/it_costs_do_you_speak_their_la.html), allows CIOs better insight into the business value generated by IT. This can help CIOs focus on optimizing the allocation of resources to those activities that generate value, enabling IT to transition from being a cost center to becoming a value-driver.

So true! What happens when IT departments try to run themselves as a business is they often times find themselves outsourced to a 3rd party whose business it is to run IT as a business…

Whether it’s called alignment, integration, convergence, or whatever – the key is to have proper communication, understanding, and a mutual dependence on each other for success.

Glenn